Question: Use the data in Problem to work this problem.
a. Use a graph to illustrate the producer surplus generated from Minnie's Mineral Springs' water production and consumption.
b. Is Minnie's an efficient producer of water? Explain your answer.
c. Suppose that new wells were discovered nearby to Minnie's and Minnie's faced competition from new producers. Explain what would happen to Minnie's output, price, and profit.
Problem: Minnie's Mineral Springs is a single-price monopoly. Columns 1 and 2 of the table set out the market demand schedule for Minnie's water, and columns 2 and 3 set out Minnie's total cost schedule.
Price Quantity Total cost
(dollars per bottle) (bottles per hour) (dollars per hour)
10 0 1
8 1 3
6 2 7
4 3 13
2 4 21
0 5 31
Calculate Minnie's marginal revenue schedule and draw a graph of the market demand curve and Minnie's marginal revenue curve. Explain why Minnie's marginal revenue is less than the price.